How to Avoid Business Travel Expense Fraud

If you supply your employees Meals, Entertainment and Travel allowances or provide company credit cards, you may be susceptible to Meals, Entertainment and Travel Expense Fraud and Abuse. The following is a description of proactive tools aimed at deterring employee Meals, Entertainment and Travel Fraud and Abuse.

Develop a company policy – If employees are going to be supplied with company credit cards, the employer needs to first determine a set of rules for the usage of said card. Said list of rules could include:

Who can use their card? – Indicate that only the employee to whom the card was initially supplied to can use the card at all times. Spouses, children and friends of the employee should not be allowed to use the card.

Where can they use their card? – Indicate the acceptable or non-acceptable establishments the employee can use their company issued credit card.

When can they use their card? – Indicate when the employee is allowed to use the credit card. Indicate what types of events are acceptable, i.e. business trips, conventions, sales meetings and other company accepted events.

What can they use their card for? – Indicate what types of travel, meals and entertainment is allowed. Is the employee allowed to fly first class? Is the employee allowed to eat at any restaurant of choice? Can the employee pay for a night out at a night club?

How much can the employee spend? – Indicate the dollar threshold allowed for Meals, Entertainment and Travel. Indicate if said threshold is per transaction and/or on a daily basis. In addition to the threshold amount for the Meals, Entertainment and Travel, the policy should also indicate a maximum tip percentage (i.e. 20% of gross bill).

What are acceptable records? – Indicate that ALL charges made on the company issued credit card should be accompanied by a legible receipt indicating at a minimum, date, time, location and amount. Indicate that if adequate records are not kept, then the employee will have to reimburse the company of each expense without adequate records. If the employee is entertaining individuals, the names, title and purpose of the meeting should be indicated in writing by the employee.

Develop a mechanism for the employee to submit their receipts? – Indicate how often employees are to submit their records and to who are they to submit them to. Does the employee need to complete a pre-determined spreadsheet indicating each charge? Does the employee need to submit to a certain superior?

What are the consequences if fraud or abuse is caught? – Indicate the consequences of abusing the company credit card. Is the employee reprimanded the first time, and any subsequent violation could constitute suspension or termination.

Employee Awareness and Acknowledgment – Once a company policy is created, each and every employee issued a company credit card, should read and understand the policy. Each employee should acknowledge their understanding of the policy and sign and date said acknowledgment.

Perform random inspections of employee compliance – Random inspections of employee compliance with the company policy should be conducted on a regular basis. If the employee knows that they are being monitored, the lower the chance of fraud and/or abuse. Many commercial programs are on the market when it comes to implementing a more streamlined inspection/compliance program. Said programs can be configured to “flag” transactions based upon date, time, location and/or amount. Company monitoring is crucial in locating and identifying questionable expenses early on before they become major problems.

Understand Red flags of Fraud and Abuse – When the company is inspecting or monitoring an employee’s expenses, the individual conducting said inspection should be aware of common red flags associated with Meals, Entertainment and Travel Fraud and Abuse. The following is a sample of red flags within Meals, Entertainment and Travel Fraud and Abuse:

The receipt indicates multiple meals

The location of the expense does not match the destination of the company approved function.

The receipt does not include contact data of the establishment

The employee does not provide a detailed receipt

The employee provides an excessive amount of receipts

The Employee provides receipts with the method of payment as “cash”

Multiple passenger names appear on the travel itinerary

Multiple employees producing receipts of the same amount

The establishment visited is not commonly known

The employee provides receipts for expenses supplied by the convention or seminar attended

The employee provides receipts with an incorrect credit card number

The employee commonly uses their personal card instead of the company card

The employee provides receipts when they were not approved for travel

Although the above list is not all inclusive, companies should be aware of the “flags” of fraud and abuse.

Larry L Bertsch, CPA & Associates can help your company development, implement and monitor a Meals, Entertainment and Travel Policy. Larry L. Bertsch, CPA & Associates routinely attends seminars associated with the past, present, and future trends of Employee Fraud and Abuse, not only with Meals, Entertainment and Travel, but on all aspects of Employee Fraud and Abuse.